Bear Stearns Collapse Turns New Hires Into Job Seekers

The New York Times - Louise Story
April 19, 2008

Thousands of people are losing their jobs on Wall Street — some before their first day of work.

They polished resumes; they sweated interviews; they landed dream jobs. But now a small group of college and business school students are discovering that their careers at Bear Stearns ended before they began. JPMorgan Chase, which bought the beleaguered investment bank last month, rescinded many of their job offers.

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But instead of starting new jobs at Bear, these students are now hunting for work along with a growing number of bankers and brokers.

Since August, the financial industry has shed more than 38,000 jobs as a result of the credit crisis and the collapse of Bear Stearns.

Citigroup added to the misery on Friday, saying it would eliminate 9,000 more jobs. No one thinks the pain will end there.

The angst is most acute at Bear. Many of its 14,000 employees are expected to lose their jobs in the coming months. JPMorgan is running what its chief executive, James Dimon, has called a ”military operation” to decide which employees at both banks will stay and which will go.

For now, many of Bear’s might-have-beens say they will keep hunting for jobs on Wall Street, where the typical new college graduate earns a starting annual salary of $80,000 or more, plus bonus.

And JPMorgan is offering the student recruits consolation prizes, provided they play by its rules. They can keep hefty signing bonuses that Bear promised them — $10,000 for college seniors, and about $50,000 for M.B.A. students — if they sign contracts in which they agree not to sue the bank over their rescinded jobs. If they do not sign, JPMorgan says, they cannot keep the money, which many of the students received last fall.

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For the Bear analyst class that will not be, the last month has been a roller coaster. The fate of their first jobs — the culmination of years of hard work — seemed to rise and fall with news from the financial markets.

The first sign of trouble came March 12, when Alan D. Schwartz, the chief executive of Bear, appeared on CNBC as rumors swirled that the bank was in trouble. After the program, a Bear human resources staff member e-mailed the clip to a group of incoming analysts and wrote a note telling them the bank was sound.

Even after JPMorgan agreed to buy Bear for a fire-sale $2 a share, Bear staff members assured some students their jobs seemed safe. When JPMorgan subsequently raised its offer to $10 a share to placate angry Bear shareholders, the message turned less certain.

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Full-time Bear employees, everyone from people only a year on the job to senior managing directors, chatted with student recruits by phone and tried to offer advice. Students who have lost their jobs said in interviews that they feel far worse for some of those who would have been their colleagues. Many of those Bear workers, after all, have families to support, the students said.

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JPMorgan made up its mind on students beginning in late March. Bear Stearns staffers called them with the news, and JPMorgan followed up with a letter a week ago, asking them not to sue if they want their signing bonuses. Of course, for the ones who received their signing bonuses last fall because they accepted job offers early, JPMorgan’s threat may not be enforceable, said Gary Phelan, a partner at Outten & Golden, an employment law firm.

”One could argue essentially that that was a gift,” Mr. Phelan said.

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